All Federal Government Contractors and Subcontractors
October 23, 2023
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On August 8, 2023, the U.S. Department of Labor (DOL) published a final rule making several changes to the Davis-Bacon Act (DBA). The DBA governs wage payment for federal government contractors and subcontractors working on construction projects that are federally funded or assisted. The rule also addresses projects that sought to take advantage of energy tax credits and carbon capture under the Inflation Reduction Act (IRA). Several of the most significant changes are summarized below. However, government contractors are encouraged to review the entire rule to determine the extent of the changes that are set to come.
Expanded Coverage. New technology projects like solar panels, wind turbines, broadband installation, and installation of electric car charges are now covered by the DBA. Certain prefabrication work is also covered as is demolition when it is done to clear the way for new construction. The addition of these categories helps address the tax credits provided by the IRA.
30% Rule Reinstated. The threshold for setting the prevailing wage has been reduced. Now, 30% of workers must be paid a particular wage for that to become the prevailing wage rather than 50% of workers. The same calculation also applies for fringe benefits. The Bureau of Labor Statistics’ wage escalators are also to be used every three years.
Fringe Benefits. Fringe benefits also must be “annualized” with contractors required to obtain DOL review and approval of existing fringe benefits. Approval must be obtained within 18 months after the published rule.
Prevailing Wage Updates. The final rule also changes when and how prevailing wages can be updated. Whenever a contract is extended or modified to include newly scoped work, the prevailing wage can be updated. Long-term, indefinite contracts also require annual prevailing wage updates. Most notably, prevailing wages are a part of the contract by operation of law even if the contracting agency did not include it in the contract.
Wage Determination Geography. Urban and rural counties are to be counted together for the purpose of calculating the prevailing wage. There is no longer a prohibition on mixing and matching rural and urban data to determine the wage rate. Where states use different wage rate calculations for their own state-funded construction projects, the DOL is allowed to incorporate the stage wage determination into the federal process.
Whistleblower Protection. Individuals engaged in protected whistleblowing are entitled to reinstatement, back pay, compensatory damages including damages for emotional distress in the event of retaliation.
DOL Expanded Powers. The DOL is now empowered to withhold funds from contractors engaged in multiple federal construction projects. Also, controlling shareholders, members of an entity holding a prime contract, or participants or partners of a joint venture of partnership holding the contract can be held liable for underpaid prevailing wages in addition to the prime contractor.
Increased Recordkeeping. Contractors now must retain all contracts, subcontracts, bids, proposals, amendments, modifications, and extensions for a period of at least three years after all the work on the prime contract is completed. This is in addition to the existing requirement of retaining certified payrolls and back-up wage payment information for the same retention period.
These points only address a few of the major changes in the 800+ page final rule. Federal contractors and subcontractors on construction projects are highly encouraged to review the changes with their legal counsel to make sure they are able to comply with the new requirements.
- Review the final rule here.
- Update policies and procedures for compliance, if applicable.
- Consult with legal counsel to update prevailing wage calculations and ensure compliance with the new requirements.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase